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Business Financials – Managing cash flow small business

If and when you manage to make a profit in your business, part of good business finance 101 means now you have to follow it up with a professional approach tomanaging the cashflow in the small business. This requires a good understanding and keeping a close eye onwhat drives the cash flow– both in AND out!

The key components of good cash flow management are:

Profitable income and increasing

Continual management and minimisation of costs and business overheads

Pricing for profit – if you’re able to increase prices, do It!

Timely collection from customers – don’t be a bank for them

Stock management – enough to sell but not too much to waste working capital

Good job management – finishing timely and with the best quality possible

Utilising all credit terms from suppliers and increasing where possible

The very best way to handlemanaging the cash flowin small business is to have a ‘Cash Flow Projection’. This is a spread-sheet that plots out what your expected income will be (taking into consideration the time customers are likely to take to pay) and what the expected outgoings will be. As well as income it includes any other funds coming into the business, such as loans, tax refunds etc. Outgoings will include items such as loan repayments, tax, dividends etc. These are just as important to take into account as their timing can have a big impact on cash flow.